The New Year rings in two traditional lists. “Resolutions” entail too much work for many. On the other hand, “predictions” often prove entertaining twice, once upon the original reading and again 12 months later as the author eats humble pie. No sooner than the ball falls in Times Square than do budding Nostradamuses rise from the shadows of Auld Lang Syne and begin opining on the immediate future of their chosen fields.
Thus do I fearlessly embark on this list of three Sure-Fire 401k Predictions for 2012:
1) By the end of the first quarter, we’ll have two competing regulatory versions of the Fiduciary Standard (both of which will compete with a third legal version of “fiduciary”). The SEC will soon pronounce a Fiduciary Standard representing neither a true meaning of fiduciary nor a true standardization. Nearly all will complain. Around the same time, the Department of Labor will reissue its new Fiduciary Rule, which will satisfy most save for the most conflicted service providers and the strictest adherents of fiduciary law. Speaking of law, neither regulator will honor or recognize eight centuries of tradition and trust law and both will continue to permit what trust law would normally declare a “prohibited self-dealing” transaction.
2) April’s implementation of the DOL’s new Fee Disclosure Rule will create a bigger headache for 401(k) plan sponsors than for 401(k) service providers. Of course, the implied prediction here – that self-serving 401(k) service providers won’t yet again convince the DOL to defer implementation of this rule – stands as the bolder prophecy. Still, assuming 401(k) investors start seeing the actual fees they pay sometime in the second quarter, expect to witness the greatest case of collective sticker shock ever. And who will they turn to with their complaints? Their 401(k) plan sponsor’s friendly HR department. When in doubt, shoot the messenger. And who will the messenger shoot?
3) By the end of the year, bundled service providers’ fees will be dropping dramatically. But it may be too late for them. After decades of hidden fees and avoiding the “fiduciary” label, 2012 finally catches up to them and exposes the self-dealing behind the curtain. Lowering fees can’t make up for the loss of trust and reputation, as 401(k) plan sponsors move en mass away from the bundled model and adopt a “best of breed” approach.
We’ll never know for sure if Nostradamus had anything much to say about the state and nature of the 401(k) plan. Word has it he spent his retirement years trying to undo the damage done by his expulsion from the Vogspherian Academy of Poetry, Insight and Delusion. But VAPID’s loss was human-kind’s gain as the peerless prognosticator left a bevy of wannabes in his wake. I figured I better jump on that bandwagon before some Vogon Constructor Fleet destroys my particular 15 minutes of fame to make room for yet another on-ramp to some Pan-Galactic Highway.
Regardless, the infrastructure of many 401(k) plans will look dramatically different a year from now.
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